New Administration, New Focus - Executive Orders & Industry Impacts

Posted by Kelly Burke on Jan 28, 2021 5:59:19 PM

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The new Administration is off to a running start, as Wednesday saw a flurry of Executive Orders come out, many of which deal with climate change, and the oil & gas industry. There are a lot of items, and they are all pretty detailed with substantial backstory, but we are going to try and briefly touch on the three major items relevant to the industry and quickly go over the main points (or, try to at least!) 

So, here's the recap:

Keystone XL:  The Biden Administration cancelled the permitting for the Keystone XL pipeline, an $8 billion dollar project that would run over 800K barrels per day from Canada through the United States. Specifically, the pipeline runs from Alberta to Nebraska, where it would then hook with existing pipeline infrastructure running to the Gulf Coast refineries. There seems to be no recourse for TC Energy to fight the permit cancellation per se, the only major sway could theoretically be if Canada argues on behalf of the project continuing but according to analysts, that will be a non-starter, Trudeau is extremely unlikely to broach the subject with the Administration amid attempts to smooth a relationship between the two countries that was somewhat fractured during the prior administration's tenure. 

Moratorium on Federal Oil & Gas Leasing:  Another executive order has put a moratorium on the lease of any federal land or offshore waters for oil & gas development. The order also stipulates that current permits in effect be reviewed against the new standard, presumably to see if some additional will be cancelled. The Administration has a stated aim of "protecting at least 30% of federal land and offshore waters" as a general goal, and the moratorium appears to be a part of that aim. Currently, fossil fuel leasing on Federal land accounts for approximately 25% of carbon emission output, which is the impetus for the move. However, as others have pointed out, the leasing also provides around 8.1 billion dollars annually in tax revenue to tribal, state, and federal governments.  22% of oil production, and 12% of natural gas production takes place on federal lands and although this moratorium does not affect current operations (yet) there is some concern that a move toward stopping production on federal land, which is the possible end goal, would push the US back into becoming a net importer of petroleum as the economy continues to recover and demand begins to increase. However, its important to note that states have wildly disparate levels of reliance on federal land for production - New Mexico is largely federally based, whereas even a complete halt would not affect Texas very much, as production land is almost exclusively privately held. This is a watch-and-see item for sure, as no one is really clear on the end goal or next steps on this item yet. 

 

Paris Accords  The Biden Administration has additionally rejoined the Paris Climate Accord, which the prior Administration withdrew from last year. The US, under President Obama, played a major role in crafting the Paris Accord in 2015. The agreement overall aims to keep global temperatures from rising no more than 2 degrees Celsius (ideally 1.5... we are already up 1 degree) by way of reducing greenhouse gas emissions. The agreement is essentially an international treaty with almost 200 member countries who have pledged to take various steps to curb emissions in their respective countries. There are a million details within the Accord, but for the US the actions required include (among others) cutting emissions by 26% below 2005 levels by 2025, tightening fuel economy standards, and would also heavily rely on the "Clean Power Plan" to hit targets. Rejoining the Paris agreement is an important symbolic gesture for the Biden Administration, as one of the major focuses they will have is "putting climate at the center of domestic, national security, and policy" 

 

So those are the major points relating to the industry from Wednesday, and they are definitely items we will continue to follow and update on. It will certainly be interesting to watch how these unfold and shape the energy industry landscape over the coming four years. Stay tuned! 

 

 

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Topics: Keystone XL, climate change, clean power plan, Biden Administration, paris accord

Clean Power Plan Rollback - Serious Issue or Symbolism?

Posted by Ed Burke on May 31, 2017 10:25:38 AM

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This March, President Trump signed an executive order to potentially roll back the Clean Power Plan, as part of a broader order regarding Energy Production & Independence in the US. The order directs the EPA to review the ruling and make a determination on whether to "rescind, repeal, or revise".

The basis of the order is the idea that the regulations hinder US energy production and have a job limiting effect. The administration has posited that the Clean Power Plan is an overstep by governmental regulating bodies, particularly the EPA, and is a part of the "War on Coal" that they promised to stop during the campaign season. 

The order does not detail what replacement protocol would be in place, or what impact the change or repeal of the Clean Power Plan would have on the Paris accords, the global agreement that essentially rests on the CPP being in effect in the United States (Refresher on that here: Senate Strikes Down Clean Power Provisions Ahead of Climate Change Summit

The Clean Power Plan, as put forth by the Obama Administration, would require States to limit carbon emissions from power plants by 32% of 2005 levels over 25 years. Initially, the 2014 drafts indicated much of the reduction would be achieved by a switch to natural gas (from coal and other carbon intensive sources) but the finalized 2015 version indicated most of the reduction would be achieved by moving to solar, wind, etc. (For details and a refresher on the power plant portion of the Clean Power Plan and the industry criticisms of it, particularly the renewable versus nat gas portions, you can read this article: "Obama, EPA announce First Ever Federal Regulations on Power Plant Emissions")

An interesting wrinkle to the entire debate raging over the CPP & the new Executive Order is that the Clean Power Plan is actually not currently in effect, officially anyways. The Plan is held up while pending lawsuits in many states, who have refused to comply with the plan details until the litigation is settled. 

However, be that as it may, many States are addressing carbon regulation concerns themselves, joining states like California and basically the entire Northeast Region in handling in-house (For example, this article in Fast Company regarding the steps being taken by Virginia's governor, among others:"Obama's Clean Power Plan might be dead in DC, but States are rebuilding it themselves" 

In addition to States handling much of the issues in contention themselves, according to the State of Electric Utility Survey for 2017, when the folks who handle energy mixes for power plants were asked what the future of their energy production looked like, less than 4% of respondents indicated they anticipated adding more coal to their energy mix, with 52% predicting their coal usage would plummet. 

So, how much of the executive order is merely symbolic? If many states and power generation companies are addressing the issue of coal and/or emissions themselves, its quite possible that even should the EPA greatly roll back the CPP, it may not be the "sky is falling" situation that many believe it would be. 

I wrote an article about the current state of the Clean Power Plan, and what's happening in light of (and despite) the President's directive. You can read that article in Oil & Energy online here: The Clean Power Plan: Repeal or Replace?

What do you think the future holds for the Clean Power Plan?

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Topics: EPA, clean power plan

Senate Strikes Down Clean Power Provisions Ahead Climate Change Summit

Posted by Ed Burke on Nov 18, 2015 4:24:41 PM

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Yesterday, the Senate voted to block President Obama’s Clean Power Plan with respect to the new EPA regulations on Power Plant Emissions announced in August, as well as blocking the moratorium on new Coal Fired Plant building. (For a refresher on those regulations, read this “Obama, EPA Announce First-Ever Federal Limits on Power Plant Emissions” )

The Senate challenged the regulations under the somewhat obscure Congressional Review Act which allows the legislature to vote to block enactment of new federal regulations as long as they do so within 60 days of publication. It was a fairly clever move, given the rules came out in August, but because technically they were not published until October, they were fair game.

The rationale behind using the Congressional Review Act cited was that nearly half of the States are suing the EPA over these specific parts of the Clean Power Plan, and several are vowing to refuse to comply pending said lawsuits.

The Review Act also is not subject to filibuster and only requires a simple majority, not 60 votes – so the final count of 52-46 (on both the emissions regulation vote, and the moratorium vote) was sufficient to block the regulations. That is, until it hits the President’s desk, where it will immediately be vetoed. It’s extremely unlikely that a veto could be overridden, so essentially this legislation will drop off in the same fashion the Keystone Bill did earlier this year.

The Power Plant portion of the multiple Climate Change resolutions proposed by the Administration is essentially the centerpiece to the overall plan. The timing of the vote is not advantageous for the Administration because, as we’ve mentioned, the Climate Change Summit is to be held in France a few days from now.

 Essentially, the regulations are critical for the U.S. if a broad Climate Change agreement is to be secured at the conference, which is really the entire point of it – to broker a global agreement.  Without being able to cite massive overhauls and regulation of emissions on a broad scale, the U.S. has much less of an ability to point to what we are doing as a model for a global pact.  

 

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Topics: EPA, obama, clean power plan, climate change summit

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